Freight rates is not an increase, but a restoration of rate: Halliday

The India Pakistan Bangladesh Ceylon Conference, or the Karmahom Conference, has been a key factor in India's dealings with its most significant trading partner, the European Union, for years.

The conference is a consortium of shipping lines that controls trade on this route. The significance of the Karmahom Conference goes beyond just controlling freight rates in this sector.

In many cases, other foreign shipping lines take a cue from Karmahom. Over the years, the conference and shippers spearheaded by the Western India Shippers' Association have frequently clashed on several issues. The most notable is terminal handling charges.

Last week, the conference announced a hike in freight rates after holding a meeting in Mumbai. In the past too, similar rate hikes had been announced, but the rates have fallen soon due to lack of unity among the consortium members.

David Halliday, the executive chairman of the conference, says in an exclusive interview with Business Standard that this time the lines are fully committed to a "rate restoration".

What is the logic behind the hike in freight rates?
This is not a rate hike, but rather a restoration of the higher levels of freight rates three years ago. The lines are facing an unprecedented high level of charter rates for ships and fuel costs.

With a significant growth in Indian exports, the greater imbalance between imports and exports is leading to the need for greater empty positioning of containers into India.

Why are there different freight rate hikes for the west-bound and the east-bound trades?
It is largely explained in my response to your first question. With the growth in Indian exports, shipping lines have to increase their overall capacity to meet demand. They also have to supply a greater number of empty equipment.

In the past too, there have been freight rate hikes which have not been adhered to by member-lines. Do you think that this will be adhered to this time? If so, why?
In the past, shipping lines' adherence to the conference business plan has been undermined due to a variety of circumstances. New competition and surplus capacity were some of the issues. The current situation is quite different.

The trade is growing at 22 per cent during the first quarter of this year and looks set to continue at that level. The lines are full to capacity.

Costs have increased to unprecedented levels, particularly in respect of time charter rates. The lines need to take the benefit of improved revenue to continue regular and reliable services.

Therefore, the conference lines are collectively and fully committed to the business plan implementation.

A perennial bone of contention between shippers and shipping lines is the terminal handling charges issue. What is the best way to sort this out?
IPBCC lines have this issue under review. But at this point of time, we have no immediate plans for changes, although a related topic congestion which is again a consequence of strong volume growth.

The conference lines have no intention of applying any charge, which is not fully justified by expense.

Is there any measure that the Indian government can take to improve the lot of foreign shipping lines in India?
The lines would probably respond to this question by encouraging investment in import and terminal facilities to cope with the growing trade and deployment by many lines of larger ships for improving scale economy.